
PERIODICAL 



BUSINESS CRISES 



J. K. INGALLS. 



NEW YOUK : 

THK I-IBERATOR (CO-OPERATIVE) P.llSTlHd AND rUBLISHINO CO., 

180 Fulton Street. 



^ 



X/^' 



I / 



No. ^ Worth Street, 
NEW YORK, August 26. 1872. 

HoM. A. S. Hewitt, Chairman, etc. 

Dear Sir : — On the day I was invited before your Committee, I was 
unable to remain until my name was called. I liavc, therefore, o.-cpared .1 
paper, and would 'be glad to have it submitted to tlie Committee, i also 
cnciose 1 " Memorial of the National Land Reform Association," which has 
already been mailed to the Members of both Plouses of Congress. That 
contains sufficient suggestions upon our Public Land Policy, and also some 
useful nmts as to Finance. 

Ii, on considering these communications, you shall desire at any future 
m!;eting ot your Committee, to ask me questions, either to explain any 
xioubtful point, or to test, my general knowledge of the subject, I will chccr- 
■fully come before you at any time on being notified at the address above. 

RespccttuUy, etc., 

J. K. INGALLS, 
Corresponding-Secrctarj' National Land Reform Association^ 



PERIODICAL BUSINESS CRISES. 

n^HE real causes which produce periodical depression of busi- 
ness and destitution of the producing classes are to be 
sought in the imperfect knowledge of the general principles of 
civil and economic law, and in the chronic misgovernment 
resulting therefrom; rather than in any of those superficial cir- 
cumstances, or matters of legislation, which have chanced to 
accompany or immediately precede those revulsions. 

It is illogical, for instance, to refer them to the cost of our 
civil war, or the destruction of property by it ; for nothing is 
more familiar to the student of history than the rapidity with 
which nations often recover from the devastations and losses of 
war, when the spirit of the people is not broken by oppressive 
and unequal laws. In our case, the loss must have been mainly 
replaced Avithin eight years after its close, or else it is difficult 
to understand how there could exist an over-production, Avhich 
throws labor out of employment. That it is not a dispropor- 
tionate production, as claimed by Prof Sumner, before the 
Congressional Labor Committee, is proved by the fact, that the 
depression is not confined to a class of interests or industries, 
but pervades all, with unimportant exceptions. Could the 
Professor's astute thought have been directed to the manifest 
disproportionate distribution which occurs from causes I shall 
attempt to point out, it would not have been so fruitless. 

Theories of Protection or Free Trade may be applied in c:> 
plmation of the suffering in special lines of business oi' of 
industry, but that they can effect such general consequences, is 
simply absurd, and even if such unreasonable results could be 
logically ascribed to them, we should still be no nearer a solu- 
tion of our problem, because the nations representing the ex- 
tremes of these respective theories are equally as great sufferers 
as ourselves. 



2 Pericdical Business Crises. 

That the increased employment of machinery lias liad tlie 
result of displacing labor to a considerable extent is doubtless 
true; but it is also true tliat the construction of such machinery 
audits rcfpiirement of constant superintendence and repair, ha? 
absorbed n.uch of that displaced labor, while it has greatly 
cheapened and extended the consumption of the manufactures 
it has apparently over-produced. 

Its present use is not so much to be deplored on account of 
the numbers it displaces from special employments, as for the 
unequal distribution of the results of its production, and which 
awards to labor not a moiety of what it produces, while to 
capital, in the form of profit, interest and rent, it surrenders the 
remainder, and thus enables great numbers to live upon the 
product without labor or service to society of any kind what- 
ever. 

We have, then, no recourse, but to look into our system of 
civil and economical legislation, to solve, our problem. We are 
told, with great deliberation and show of knowledge, that 
"nothing can be done by legislation to relieve the present 
distress," and if we are compelled, logically, or otherwise, to 
accept this conclusion, as regards labor ^nd the condition of the 
poor, may we not be allowed to enquire into the workings of 
that legislation which has been so lavishly bestowed, particu- 
larly during the last fifteen years, upon speculative schemes, to 
aid moneyed corporations and enterprising adventurers of 
every description; and to give fortunes to those who live by- 
profits and interest drawn from the products of industry.^ 

From the first our legislation, State and National, has been 
under the influence oi a Lobby, constantly increasing in its 
unscrupulous and relentless grasp of power, and which has 
often become thorovighly organized for the promotion of 
schemes of aggrandizement wholly incompatible with the public 
good. 

Had this description of legislation merely enriched the few at the 
temporary expense of the many, the effects might have been less 
deplorable. But, while doing this, it has also stimulated specu- 
lative greed in all departments of business, and developed the 
inflation of prices to such a degree, that the reflex shrinkage of 
prices, must necessarily bring ruin and bankruptcy to thous- 
ands, and loss of employment to millions. And must the unfor- 
tunate toiler now be told that legislation, which has done so 



Pericdical Business Crises, 3 

much to hasten and intensify this catastrophe, cannot be expected 
to do anything to relieve it ? Surely workingmen, unschooled 
in the subtleties of our current "Political Economy," may be 
pardoned for having dreamed that a government, Avhich had 
freely voted such subsidies of land and money to private corpor- 
ations ; such franchises, as actually abdicated its own right of 
"Eminent Domain," might devise some practicable relief to the 
idle hands and starving mouths of those who had produced the 
wealth thus handed over to organized rapacity. 

I am fully aware of the dangers and difficulties which attend 
legislative interference in questions of this nature. Had our 
remonstrances for more than a quarter of a century been heeded, 
the immense domain, now held by railroad corporations, or 
organizations growing out of land grants, would have been in 
the hands of hardy pioneers, whose identity of interests with the 
best good of the nation, and the independence which self-em- 
ployment begets, would have been a perfect safeguard and 
barrier against the extreme agitation in business or in politics 
which now threatens the stability of our institutions. Abun- 
dant supply of food would have been secured; a steadily increas- 
*ng market for our products of the shop and factory, and a 
healthful, becai;se stable, growth of all our industries. 

At present, it would seem useless to attempt giving employ- 
ment to labor where it is. Capital cannot, or will not. Gov- 
ernment cannot, if it were disposed, without assuming control 
of the land which is the final source or means of all useful em- 
ployments as of all wealth. Many of the industries now carried 
on in cities are not only useless but harmful to society; and 
serve no earthly purpose but to encourage the accumulation of 
the populations in cities and large towns, already swelled to a 
monstrous disproportion to that of the rural districts. It is 
possible, however, to do something, in the repeal of laws now 
existing, which, in the selfish interests of corporations, and large 
ownerships of the soil, bar the way to the cultivation of the* 
land. It is downright insult to the poor to be told that the}' 
" would not go upon the land if it were given them," when rail- 
road corporations, to whom the land has been given, by the 
millions of acres, are allowed to put a rate of from three to ten 
times the government price per acre upon the land the poor re- 
quire. Their right to occupy those lands, in quantities, limited 
to their need and ability to cultivate and improve, should never 



4 Periodical Business Crises. 

^- 

have been questioned by our government, or interfered with in 
any way, except to define and regulate it. The immense dona- 
tions of these lands to soulless corporations and oppressive 
monopolists, was a mistake which will take generations of 
suffering to remedy. 

In relation to the existing depression of business, it is evident 
to me that the panic, which has now continued some five 
years, is to be mainly accounted for on general principles. That 
similar crises have occurred for centuries as stated by parties be- 
fore the Congressional Committee is a matter of history, and that 
they return with "di periodicity which almost indicates the existence 
of a " natural law," as suggested by Prof Bartolemy Price, there 
can be no question. The present writer has lived through six 
of those crises, and remembers with vividness, the consequences 
of them all, except, perhaps, the first, upon the poor and indus- 
trious, with whom his fortunes Jiave, in the main, been cast, and 
for whom his sympathies remain active. They may be desig- 
nated as those of 1819, 1829, 1837, 1847, I857 and 1873. This 
last crisis, but for the war, the adoption of a National Currency, 
and other disturbing influences, should have occurred in 1866 or 
1867, and, at the present or following year, would have been 
ready to occur again, so that'we now are really experiencing the 
reaction belonging to the two periods. 

This regularity of return, indicates, doubtless, a cause, wholl^y 
independent of any legislative action on tariffs or finance, the 
war or the introduction of machinery, all of which causes have at 
most had but the effect of disturbing or delaying, not turning 
aside the periodic issue. 

The writer believes that he can point out an efficient cause, 
and also show that its removal, or great amelioration, if desir- 
able, lies largely'within the range of National Legislation, and 
legislation too, wliich shall be instrumental in repealing and 
modifying existing laws, rather than in making new and untried 
experiments. 

I "vill commence with propositions, accepted and familiar to 
all students of Political Economy. 

First — The materials of all wealth originate primarily in the 
earth. 

But, Second — It is only by the employment of labor that they 
can ever be made to constitute true wealth. 

And, Third — All who do not possess property in the land, or 



Pericdical Business Crises. 5 

ready access to it, must draw their subsistence from wages re- 
ceived directly or indirectly from the proprietors of the soil. 
[See M. Garnier, " View of Smith," etc.] 

As stated by Adam Smith, " the produce of labor constitvites 
the natural recompense or wages of labor." Mr. Ricardo, who 
seems not to have understood that the monopoly of the land 
was the creature of civil, not natural law, held the natural rate 
of ^vages to be a sum which would barely support the lab- 
orer, and enable him to reproduce his kind. On the contrary, 
however, until property is assumed in the land by the strong in 
muscle or brain, the whole produce of labor belongs to the lab- 
orer and is his natural reward. But, as Dr. Smith says, "as 
soon as the land becomes private property, the landlord demands 
a share of almost all the products Avhich the laborer can either 
raise or collect from it." From this experience, and this arti- 
ficial condition of labor in relation to the land comes all the 
fallacies of the "usufruct of wealth," and all those customs and 
laws which exact and sanction usury or interest, speculative 
profits, and incomes from the mere possession of wealth. 

Society, by its civil laws and positive enactments in regard to 
real estate, has sanctioned and reinforced this assumption or 
usurpation of the elder and stronger brother, instead of pro- 
tecting the interest of the minor and weaker. But the time has 
now come, especially in this republican land, which has em- 
braced the theory of making all " equal before the law," to take 
the administration out of the hands of him who has so grossly 
violated his trust, and re-apportion this patrimony in the interest 
of all. 

The result of this assumption of private control over unlimited 
extent ot the soil, is first, to enable the owner to exclude from 
its occupancy or cultivation, all other persons, who will not pay 
him tribute in money or in kind. This removes him entirely 
from the operation of the law of competition in the exchange 
of services, while the wages laborer, as Mr. Thornton has shown, 
is alone subjected to a forced and unnatural competition.] 
Land monopoly places a "monopoly price" upon everything 
produced or gathered from the land. '■v, I am aware this point 
is denied by writers who have followed Ricardo, but I am also 
aware of the specious, not to say superficial reasonings, which 
they employ to evade a point Dr. Smith made irrefutable. 

Accumulations of wealth (or stock) under the operation of 



6 Periodical Business Crises. 

this arbitrary control of the soil and the ability to purchase into 
this class monopoly, has given to money its unwarrantea power 
to obtain an income for mere time use. Now, wliile the accumu- 
lations thus withdrawn from the productions of labor are con- 
stantly returned to business, by being reinvested in productixe 
' industry and healthful enterprise, the hurtful consequences 
whicli follow are not apparent, but, as the process of accumulation 
and absorption goes on, extravagance and speculation gradually 
developc themselves, until they assimie absolute control of all 
industry as well as trade. Confidence is then weakened. Capi- 
tal is Avithdrawn from investment. Prices fall, and a general 
shrinkage of values of all the products of labor, and, necessarily, 
of wages, takes place. 

The term of these crises are sometimes considerably extended, 
and their results intensified, by the employment of an expanded 
circulating medium and of business credits. This reacts upon 
the real estate market, running up lands in favored locations to 
fabulous prices, and so, when the extreme has been reached, 
there being no farther recourse, the crash comes. With the day 
of pa3'ment, property has to be sacrificed to meet obligations, 
shrinkages take place, which fall 7uholly on that portion of the 
capital employed which is not subject to the leins of secured 
debt. The ruin of the debtor is completed, and to the loss of all 
creditors who are unsecured. The means of employing labor 
are lost to those who would employ it, and the laborer is thrown 
out of work. Now, this crisis, which brings such disaster to 
business and suffering to labor, becomes the harvest time of all 
such capitalists as have managed to keep their credits well se- 
cured; properties often falling into the hands of the parties who 
sold them, at one-half the price originally paid. 

Dr. Smith describes such capitalist as a '■'■person 7oJio Jias a capital 
from which he 7vishes to derive a revenue 7vithoitt takini:; the trouble to 
employ it himself." [" Wealth of Nations," c. 4, closing para- 
graph.] In other words, one who wishes to obtain the services 
of others without rendering any service himself in return. By 
the time these crises occiu", this purpose has become a mania — to 
derive an income from labor without even giving it employ- 
ment. 

It will be found that these crises have occurred since the for- 
mation of our goverment (and Mr. Horace White says, for the 
last two hundred and fiftv years), at quite regular intervals of 



Periodical Business Crises, 7 

about ten years, which neither protective legislation, free trade 
acts, change of financial systems, nor even very destructive 
foreign or civil wars have been able greatly to vary. Now, this 
period is about the same as that in which a debt at seven per cent, 
per annum, compound interest, becomes doubled. That is to say, 
that if the whole capital of the nation is loaned at seven per 
cent., and the interest compounded, in a little more than ten 
years the entire capita) of the country will be required to pay 
its own interest. Hence, repudiation of the principal becomes 
inevitable, or else the endless perpetuity of the debt, absorbing 
the complete wealth of society in every decade. Fortunately 
for mankind, the former obtains to a large extent, and thus 
periodically, through extensive bankruptcies and suspensions, 
the clogs are removed from the wheels of industry and of busi- 
ness, and they are allowed to move on again, till the return ot 
another period. 

It is important to distinguish, in the use of the term " capital," 
between that Avhich is actively, or productively employed, and 
that which serves the possessor in deriving a revenue from it 
without taking the trouble to employ it. The man who puts his 
property into some industrial or commercial business, accom- 
panies it with his personal efforts in administration, and other 
useful service. He assumes risks and responsibilities w-hich. 
justly entitle him to share liberally in the production resulting;, 
but the secured creditor does nothing of this, and is no more 
entitled to a share of the results, than if he had placed his gold 
with a Safe Deposit Company, and for which he would have had 
to pay, instead of receiving a premium. This distinction must be 
borne in mind, w'hen we refer to the losses of capital sustained 
in these crises. It is the capital employed in business, or which 
has been loaned without security or with imperfect security, 
which has been swallowed up. The fully secured capital, on 
the other hand, has not suffered; but has relatively, at least, 
been greatly increased by these revulsions. 

Mr. White is evidently misled by his references to the failures 
of the last five years. The Avhole number of bankrupt business 
firms may show not much over five per cent. He does not say 
that it shows only five per cent, of the capital previously 
employed which has been wiped out during that time. An esti- 
mate of the general loss to the country through failures, suspen- 
sions of Banking, Insurance and Railroad Companies, and vari- 



55 Periodical Business Crises, 

ous speculative enterprises, would probably treble that rate, and, 
taken in connection with the reduction of the capitals of corpor- 
ations, firms and individuals still remaining solvent, Avith fore- 
closures on properties, which have not been sold for enough to 
meet the mortgages, and all those sums previously paid on pro- 
perty which has been lost on foreclosures, fifty per cent, would 
be a much nearer estimate to the amounts cancelled without 
consideration than five per cent. Statistics on all these items 
-would be difficult to obtain, but that losses in the various forms 
in whjcli they have occurred constitute a large proportion of 
the capital employed in 1873, does not admit of question. 

To show with greater di'-tinctness, the operation of the prin- 
ciple which produces these crises, let us suppose that, instead of 
the large proportion of the capital of the country, which is let 
out at interest, the land should be so loaned ; and further suppose 
that, instead of the annual percentage being paid in money, it was 
stipulated to be paid in kind. That, as interest on money is paid 
in money, so the rent or interest on land should be paid /// land 
A man borrowing land on such conditions, would, in a dozen 
years or so, pay back as interest all he had borrowed, and must 
of necessity, repudiate the principal — become bankrupt in land. 
For it is evident that in the period in which the payments of in- 
terest would amount to a sum equal to the principal, an amount 
of land equal to itself, would be required to be returned to the 
owner for its own use; and, as the amount of land in any town, 
state, nation, or the world, is a fixed and definite one; the opera- 
tion of any such stipulation, as a rule, would be impossible, 
and besides producing untold embarassment and suffering, must 
end at last in repudiation. A system of contracts like the above, 
would be held in all courts as invalid, because they involved con- 
ditions well known to be impossible. 

But the operation of our credit system, and payment of inter- 
est on capital to those who take no care in its employment, vir- 
tually involves the same consequences. By the accumulations 
of interest upon a given sum, the possessor can purchase a given 
amount of land in every period, corresponding to the amount of the 
principal invested. This enables the capitalistic class, as distin- 
guished from the industrial or commercial class, to control the 
ownership of the land just as effectually as the titled nobility 01 
any country ever did. Already in our older states, the number 
-of landholders are rapidly decreasing, although the general 



Periodical Business Crises. I 

population, particularly in cities, is on the increase, thus con- 
tinually augmenting the dependent or wages class, and ren- 
dering any emancipation therefrom more and more liopeless. 

Access to cheap lands lias, on each recurrence of a crisis, 
heretofore opened an avenue to our surplus labor when thrown 
out of employ, and also extended the market for our manufac- 
tures, thus operating both ways, greatly to relieve the depres- 
sion. But all our great railway facilities have not kept pace 
with the rapacity of the land-monopolists, and a settler now, to 
obtain public land, must take himself twenty or thirty miles 
from any thoroughfare, and wholly out of social and congenial 
life. 

All our boasted improvement in facilities for travel have not 
helped the dependent laborer. His natural powers will carry 
him as far as his days' wages wi^ transport him on our subsi- 
dized railroads. 

Government may wisely repeal all such laws as facilitate the 
alienation of the public lands. Jt may refuse to sanction con- 
tracts pledging the homestead for debt, or to enforce the collec- 
tion of any debt, the amount of the principal of which has been 
once paid in interest. It may provide for rapid payment of the 
public debt, or its change from an interest-bearing to a non- 
interest-bearing one. 

In fact, the war debt has already been repaid, much of it has 
been twice paid, and some of it has been three and four times 
paid, in the form of interest and premiums. To legislate so that 
this species of property may be maintained at par, after being three 
times paid, while all other property has depreciated one-half, 
or more, is' to unfairly discriminate between classes of people 
who hold different kinds of property, and in favor of those who 
render no service to society. That the public faith should be 
held sacred; that the validity of contracts should be scrupu- 
lously respected ; none will deny. But public faith is due to 
the humblest as well as to the proudest of its citizens, and as fully 
to a iiolder, of a dollar treasury note as to a holder of a gov- 
ernment bond. If either cannot be paid without ruin to the 
other and the people at large, the situation is one that demands 
compromise and composition. 

The taking or paying of interest has been condemned by every 
moralist, from Aristotle and Moses to John Ruskin, of our own 
time. In every seven years, Moses, the great Jewish lawgiver, 



lO Pci-io.tical Business Crises. 

provided for the cancellation of all debts, and at the fiftieth year 
for the re-apportionment of the land. In our times of rapid 
accummulation, debts on interest should be held cancelled at 
least after ten years payment of interest. It is seen now on 
economical principles, that the system of usance is as destructive 
to our material prosperity, as it has ever been re<^arded detri- 
mental to morals and the discharge of human duty. Govern- 
ment then, should discourage, not sanction, it, and clearly de- 
fine the kind and nature of the contracts it will attempt to 
enforce. 

The superstition of the trader or money-lender should no 
more form a basis for legislation than that of a religious de- 
votee, who wants God put in the Constitution, that his views of 
what he conceived to be His will may be enforced upon the 
people. 

The complete remedy of the great evils of our industrial sys- 
tem, the efficient limitation of private property in land, or the 
full assumption of its control. by the state, county or township, 
will require the concurrent action of the several states; but 
much can be done by the general government to discourage 
and render less baneful the tendencies here pointed out. While 
our system of land monopoly remains, and the interest on money 
upheld mainly from that basis continues, there should be re- 
quired from the states a uniform system of bankruptcy as re- 
quired by the Constitution, which will give every facility, in an 
inexpensive way, and not to the ruin of debtor and creditor, in 
the interest of officials and attorneys, as under our late bank- 
rupt law, to effect composition between debtors and creditors; 
so that the failures this system makes inevitable in returning 
periods should be as evenly distributed as possible over the 
whole term, and not be allowed to attain the prodigious pro- 
portions, which derange all stability of business, and bring 
disaster and ruin on the industrious and frugal man of busi- 
ness as well as the reckless and extravagant. 

Much could be done by refusing to enforce claims for the pay- 
ment of interest, except where payment of the principal was 
withheld for the purpose of injuring the party to whom the 
debt was owing, or for arrears of wages not exceeding one 
month.' Granting credit and incurring debt arc in no avIsc 
necessary transactions. They give no increase to social, wcilth, 
nor any healthful stimulus to productive industry. The q;ov- 



Periodical Business Crises. 1 1 

crnment may rightfully refuse to rectify the mistakes which 
people make as to whom they will trust, or the value of the 
securities they may take. Laws in regard to exemption ot 
Jiomestead and necessary houseiiold effects, with mechanics' 
tools, etc., exist already in many states, and their spirit should 
be incorporated into our National Code, so that its laws should 
never be employed to reduce its citizens to beggary and want, 
in consequenee of being caught in the meshes of a system from 
which bankruptcy opens the only door of escape, and the period 
of whose return can be foretold with an accuracy almost equal 
to that which predicts the return of the tides. 

A measure I can largely endorse is one suggested by the bill 
introduced by Mr. Wright, of Pennsylvania, at the last session 
of Congress, to promote settlement upon the public lands. ] 
Whether government may properly assist the industrious poor, 
who seek relief by securing gratuitous transportation, over j 
roads it has paid to construct, and tlien bestowed on private 
corporations, to be run for private gain, will doubtless be dis- 
puted by those in whose interests these lavish subsidies have 
been made; but we can hardly expect such objections to weigh 
with those who feel themselves thus deprived of their natural 
birthright, and are so deeply suffering in consequence. 

If Congress shall see fit to go further and supply the settlers 
with means, as Mr. Wright's bill proposes, to begin a home and \ 
achieve independent self-employment, and thus emancipate 
themselves from servile labor, it should so carefully guard its 
measures us that there will be no opportunity that the aid thus 
rendered shall be perverted or misapplied. 

In this connection, I wish to call attention to a recent decision 
of the Department of the Interior in regard to the right of pre- 
emption by actual settlers on certain unsold railroad lands, 
which, by the acts chartering those companies are re-opened to 
settlement under the pre-emption act. The railroad companies 
interested in the decision have already signified their intention 
of disregarding or contesting that decision. It is publicly re- 
ported that at least one of those companies, viz : "The Kansas 
Pacific," has anticipated the consequence of the decision by hav- 
ing transferred its lands to a portion of its managing members, 
who have gone outside and formed an organization to bargain 
with themselves as was done by the " Credit Mobilier," of in- 
famous notoriety. 



12 Periodical Business Crises. 

I would most earnestly urge Congress to adopt immediate 
legislation which will so reinforce the decision of Secretary 
Schurz on that question, as. will make it impossible for any 
court to entertain a doubt as to its lawfulness, and forever pre- 
vent the success of so stupendous a public swindle, as that said 
to have been devised by the companies. 

It is a matter of public notoriety, that our Patent Laws are no 
longer serviceable as a means of encouraging useful invention ; 
but are mainly availed of to foster monopoly, and promote 
rapacious schemes, through combinations, which use them to 
terrorize those employed in legitimate business through fears 
of vexation and costly litirjation. Those laws should either be 
wholly repealed, or so modified as to render monopoly of the 
manufacture, or of trade in patented articles impossible. This 
might be done by allowing the inventor to collect from those 
v/ho made or sold a limited fee for a limited time; without in- 
terfering in any way with the regular course of competition in 
any business. As now interpreted, our Patent Laws are a 
source of immense evil, injurious to commerce and every sphere 
of industry, and constitute a nuisance, which should be abol- 
ished. 



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